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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

USING INTERNAL CONTROLS TO PREVENT ERRORS The following misstatements occurred in the records of ICW Company. For each misstatement, suggest a control to prevent it from happening.

1. A bill from a supplier was paid even though the shipment was not received.

2. A supplier’s bill was paid twice for the same purchase.

3. A plant employee increased his pay rate by entering the computer system using a plant terminal and altering the payroll records.

4. The cash receipts clerk kept a portion of the regular bank deposits for personal use and concealed the theft by manipulating the monthly bank reconciliation she prepared.

1.

To determine

Suggest a control to prevent it from happening for the misstatement, if a bill from a supplier was paid even though the shipment was not received.

Explanation

Internal control activities:

Control activities consist of policies and procedures that are established to assist the management in meeting its control objectives.

Adequate documents and records:

Adequate documents and records must be used for recording all business transaction...

2.

To determine

Suggest a control to prevent it from happening for the misstatement, if a supplier’s bill was paid twice for the same purchase.

3.

To determine

Suggest a control to prevent it from happening for the misstatement, if a plant employee increased the pay rate by entering the computer system using a plant terminal and altering the payroll records.

4.

To determine

Suggest a control to prevent it from happening for the misstatement, if the cash receipts clerk kept a portion of the regular bank deposits for personal use and concealed the theft by manipulating the monthly bank reconciliation prepared.

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